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KARVY report on Cummins India:
Friday, June 8, 2007
Karvy Stock Broking has maintained an outperformer rating on Cummins India with a target price of Rs 365.
For Q4FY07 (standalone), Cummins reported revenue growth of 30%YoY (QoQ increase of 6%) to Rs 5 billion as against expectation of Rs 4.94 billion. Engine business grew by 28.2% to Rs 4.69 billion while other business reported revenue growth of 52% to Rs 398 million.
EBIDTA margins improved form 15% in Q4FY06 to 16.3% for the quarter against expectations of 15%. The margin improvement is mainly due to lower raw material cost which, as a percentage of sales decreased from 67% in Q4FY06 to 66% in Q4FY07. The operating profit increased by 41% to Rs 823 million. The other income increased by 20% to Rs 236 million due to better treasury management of surplus cash of around Rs 2.6 billion. Overall, the net profit increased by 21% YoY to Rs 656 million translating into EPS of Rs 3.3 as against expectation of Rs 3 during the quarter. The company has declared an interim dividend of Rs 2/- per equity share.
For FY07 on consolidated basis, revenue increased by 19.6% to Rs 21.2 billion and adjusted profit grew by 44% to Rs 2.6 billion. At a current price of Rs 303, the stock is trading at 22.5x FY07 and 16.6x FY08 earnings and EV/EBIDTA it is trading at 18.7xFY07 and 12.5x FY08E. We have revised FY08 revenue estimates upward by 1.8% to Rs 26.4 billion and profit by 8.6% to Rs 3.6 billion on back of strong Q4FY07 numbers. We maintain our valuation at 20xFY08 earnings with revised target price of Rs 365 (previous Rs 335) and maintain our Outperformer rating.
For Q4FY07 (standalone), Cummins reported revenue growth of 30%YoY (QoQ increase of 6%) to Rs 5 billion as against expectation of Rs 4.94 billion. Engine business grew by 28.2% to Rs 4.69 billion while other business reported revenue growth of 52% to Rs 398 million.
EBIDTA margins improved form 15% in Q4FY06 to 16.3% for the quarter against expectations of 15%. The margin improvement is mainly due to lower raw material cost which, as a percentage of sales decreased from 67% in Q4FY06 to 66% in Q4FY07. The operating profit increased by 41% to Rs 823 million. The other income increased by 20% to Rs 236 million due to better treasury management of surplus cash of around Rs 2.6 billion. Overall, the net profit increased by 21% YoY to Rs 656 million translating into EPS of Rs 3.3 as against expectation of Rs 3 during the quarter. The company has declared an interim dividend of Rs 2/- per equity share.
For FY07 on consolidated basis, revenue increased by 19.6% to Rs 21.2 billion and adjusted profit grew by 44% to Rs 2.6 billion. At a current price of Rs 303, the stock is trading at 22.5x FY07 and 16.6x FY08 earnings and EV/EBIDTA it is trading at 18.7xFY07 and 12.5x FY08E. We have revised FY08 revenue estimates upward by 1.8% to Rs 26.4 billion and profit by 8.6% to Rs 3.6 billion on back of strong Q4FY07 numbers. We maintain our valuation at 20xFY08 earnings with revised target price of Rs 365 (previous Rs 335) and maintain our Outperformer rating.
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Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.
